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November 10, 2020

Demand for DeFi stemming from institutional investors with Delphi Digital


While liquidity pools and automated market making have been taking the DeFi spotlight of late, Veta Protocol started developing its DeFi network for issuing, trading and settling derivatives contracts two years ago. With the launch of the protocol nearing, Vega Protocol Founder Barney Mannerings and Delphi Digital partner Jose Macedo spoke with Trustology’s Paul Yardley about the trends.

Vega’s Mannerings compared what his team is building compared to Ethereum, saying,

(27:32) “The thing we noticed when we started thinking about building Vega was that everything at the time, a lot of focus was on Ethereum and the Ethereum ecosystem and building on Ethereum. And I have a lot of experience in derivatives and building derivatives marketplaces but also around the risks that exist in derivatives and the complexity of those products. And what we realized was that the Ethereum platform, its total power and computation is about the same as a pocket calculator. And really it wasn’t possible to build high-quality professional standard derivatives products on the Ethereum blockchain. So really what Vega is, is an attempt to deconstruct derivatives from top to bottom, work out exactly what it is that the traders need for capital efficient profesional derivatives and then build a blockchain assisted for trading those as efficiently as possible in a way that will open up the disruption eventually of the legacy centralized derivative market.”

Delphi Digital’s Jose Macedo discussed the demand for DeFi stemming from the institutional investor space, saying,

(29:59) “Institutional clients are brought in by the pace of innovation that’s happening. And they’re interested, I think particularly what interests them is the composibilty aspect of DeFi and the permissionless innovation that it enables. So obviously each tool that’s built on DeFi is kind of an open tool that can be leveraged by anyone else that’s building and composed together with other tools to build something entirely new. And I think with DeFi right now we’re still at kind of the email phase of the internet where we’re putting things that were previously possible and putting them onto this decentralized infrastructure. Although I do think there are completely new things, like flash loans, like automated market makers which are new and different. But I think what we’ll start to see , and especially with stuff like Vega coming online that allows much greater scalability, is that composability allowing us to build things that are completely new.”

Both Mannerings and Macedo agree that delivering value is how the industry will convince more institutions to adopt DeFi as a platform. Macedo said it this way,

(39:07) “Real value is the key. Creating real value. People aren’t going to use these products because they’re decentralized, because they’re censorship resistant. I think they really have to have architectures that are fundamentally better and more efficient…There’s been a lot of obviously less interesting stuff that’s happening with yield farming…but there’s also been incredible successes that we should also highlight in terms of I can now get better execution on stablecoin trades on a decentralized exchange than I can on a centralized one.”

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Gerelyn Terzo
Gerelyn caught wind of bitcoin in mid-2017 and after learning about the peer-to-peer nature of Satoshi's creation has never looked back. Previously she covered institutional investing and fintech for several major trade publications. Gerelyn resides in Verona, N.J.

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